Update on the Implementation of
the Capital Market Masterplan (CMP)
As at 31^st  December 2007

R1

A single Malaysian exchange should be established through the consolidation of all existing exchanges by 2002

The completion of merger exercise between MESDAQ and the KLSE and the launch of MESDAQ market as a division within the KLSE.

R2

MESDAQ should be merged with KLSE as part of the exchange consolidation process

The MESDAQ Market was established at the KLSE on 18 March 2002.

R3

The Malaysian exchange should demutualise and list on the stock market by 2003

The Demutualisation Act came into effect on 2^nd January 2004. Bursa was listed on the Main Board on 18 March 2005.

R8

A single clearance and settlement institution for all exchange-traded products should be created by 2002

The merger of MDCH and SCANS was completed in November 2002.

R10

The settlement cycle should be shortened to T+3 in line with international best practice

T+3 has been effected for all trades on the KLSE and MESDAQ.

R11

A global depository account for each investor will be established in the central depository

The global depository account has been established based on the availability of global account features in various related facilities.

R12

The SCANS clearing fee will be reduced from 0.05% to 0.04% with effect from 1 July 2001, subject to a maximum of RM200 per contract

The reduction has been effective since 1 July 2001.

R13

The SCORE fee will be reduced in two stages to 0.005% and 0.0025% with effect from 1 September 2000 and 1 July 2001 respectively. Subsequently, SCORE fees will be reviewed further

The reduction was implemented in two stages, from September 2000 and July 2001 respectively.

R14

The SC levy will be reduced to 0.015% from the present 0.02% with effect from 1 July 2001

The reduction has been effective since 1 July 2001.

R15

Stamp duty should be capped at RM200 per contract for all trades on the KLSE and can be further considered for eventual removal

With effect from 17 March 2003, stamp duty is capped at RM200 per contract.

R16

Administrative procedures and rule-structures in relation to portfolio investments should be streamlined in order to reduce operational costs to investors

Amendments have been made to the KLSE rules, MCD rules, and the SICDA. The 10% levy on repatriated profits has also been removed.

R17

A full disclosure-based framework for the offer and issuance of equity securities will be implemented in 2001

DBR took effect on 1 May 2003 with the release of seven revised fund-raising guidelines.

R19

A shelf registration scheme for the issuance of equity securities will be introduced

The objective of this recommendation was to facilitate an expedited fund-raising process for eligible companies. This has been achieved through the shortening of timeframes:

Private placements - within 24-hour

Registeration of abridged prospectuses:  1 day

Standalone rights issue: 5 days

R20

The market for the provision of corporate advisory services will be further deregulated

UBs are allowed to undertake the full range of corporate advisory services. 1+1 SBCs are also allowed to do so, subject to certain conditions.

R21

Technological solutions that enhance the efficiency of the fund-raising process will be identified and implemented

eIPO Guidelines released.

R22

Breadth of listings in the Malaysian equity market will be gradually widened to include listings of foreign companies

Large foreign-owned corporations are allowed to seek primary or secondary listings on the Main Board of Bursa Malaysia

R23

The introduction of Exchange Traded Funds will be allowed

Guidelines on Exchange Traded Funds were approved and released on the SC’s Website on 28 June 2005

R24

Comprehensive measures to enhance MESDAQ’s role as a fund-raising centre for high-growth companies will be implemented

Amendments to the securities laws to allow KLSE/MESDAQ to approve the relevant types of corporate proposals have been gazetted.

R25

The listing of technology incubators will be allowed in 2001

The listing of technology incubators on MESDAQ has been allowed.

R26

The promotion and development of the venture capital industry should be centrally co-ordinated

Venture Capital Consultative Council has been established to co-ordinate development of the industry.

R27

Venture capital companies will be granted exempt dealer status under the SIA

The Securities Industry (Exempt Dealer) (No.2) Order 2002 was gazetted and came into force on 1 Aug 2002.

R28

The establishment of venture capital trusts that can invest up to 100% in unquoted companies will be allowed

Fund managers are allowed to establish a venture capital trust for sophisticated investors under the guidelines on restricted investment scheme

R29

The SC will undertake a review of the tax framework for the venture capital industry in collaboration with the tax authorities, industry participants and the central co-ordinating agency for the industry

Tax incentives have been given under Budgets 2000, 2001, 2003 and 2004.

R30

Joint investment programmes between the government and private sector venture capitalists should be increased to boost private sector participation in disbursing government funds for seed and start-up capital

Establishment of the Malaysian Venture Capital Management Berhad (MAVCAP) and Kumpulan Modal Perdana Sdn. Bhd. To disburse government funds as well as undertake joint venture investments with private sector venture capitalists

R31

The participation of local institutional investors in venture capital funds should be promoted

The Malaysian Venture Capital Development Council (MVCDC) under the chairmanship of the SC has organised a host of engagement and training sessions to promote more participation of institutional funds into venture capital. In August 2006, MVCDC organised an “Investor Forum” attended by 36 participants and this has now become an annual event. In addition, the VC portal was launched to provide more information and transparency about the VC industry to investors.

Local corporations have now become one of the major sources of venture capital fund to the Malaysian capital industry.  In 2006, they accounted for 37.6% of venture capital funds. 

R32

Greater foreign participation in the venture capital industry should be allowed

In Budget 2005, the Government announced that foreign participants will be allowed to own 100% equity in venture capital and venture capital management corporations

R33

A full disclosure-based framework for the issuance of corporate bonds will be implemented

Full DBR for bond issuance was introduced on 1 July 2000, with SC as the single approving authority for corporate bond issues.

R34

A shelf-registration scheme for the issuance of corporate bonds will be introduced

Introduced on 1 July 2000.

R36

A framework for the issuance of asset-backed securities will be introduced

Revised ABS and PDS Guidelines were released in March 2003.

R37

The existing taxation framework for special purpose vehicles should be clarified to reflect economic substance, and the stamp duty and real property gains tax on transactions relating to the issuance of asset-backed securities should be removed to encourage asset securitisation

Under Budget 2004, ABS will be given equal tax treatment as other conventional securities. Expenses incurred in the issuance of ABS are granted tax deduction for 5 years.

R38

Liquidity in benchmark issues should be developed and established

New 5-year and 10-year MGS were issued in November 2002 and December 2002 respectively. Since the National Bond Market Committee’s programme for MGS issuance began in 2000, the frequency and value of issuance has increased significantly over the years.

R39

A programme to issue MGS should be encouraged and promoted with a view to establishing them as the immediate benchmark securities for the Malaysian bond market

R40

Regulated short selling of MGS and corporate bonds should be allowed

Regulated short-selling benchmark for MGS, Cagamas bonds, Khazanah bonds and Treasury Bills by principal dealers is allowed.

R41

Non-financial institutions should be allowed to conduct the entire scope of repo activities

Amendments have been made to BAFIA to allow non-financial institutions to conduct the entire scope of repo activities.

R42

Markets in MGS futures and options should be established

MDEX introduced the 5-year futures contract in March 2002. 3- and 10-year futures were launched in September 2003.

R43

EPF’s investment requirements should be eased to free up its “captive demand” for MGS

The impact of EPF’s captive demand on MGS has been reduced significantly arising from the following developments:

• Removal of the withholding tax for foreign investment in MGS in September 2004, as proposed by the SC, has attracted higher foreign participation in the MGS (foreign holding in MGS is close to 10% in March 2007)

• EPF has been imposed a limit in bidding MGS which are issued on non-private placement basis; and

• EPF has been encouraged by the Government to diversify its investment exposure to corporate bonds.

R44

Access to trading on the over-the-counter market should be extended to a wider range of participants

The Guidelines in Unlisted Debt Securities by Universal Brokers, enabling UBs to deal directly in unlisted securities, was released in Oct 2002.

R45

A phased programme to encourage international financial institutions and multinational corporations to issue ringgit bonds should be considered

Multilateral Development Banks, where Malaysia is a member, and foreign multinational corporations can issue ringgit-denominated bonds

R46

International ratings for domestic bond issuance will be allowed

Under the Practice Note 2 of the PDS and Islamic Securities Guidelines, international ratings are acceptable for the issue, offer or invitation of Ringgit denominated PDS by a Multilateral Development Bank or Multilateral Financial Institution in Malaysia. Similar provisions have also been made in PN 2B and PN 1A issued by the SC

R48

The participation of retail investors in the corporate bond market will be encouraged through the promotion of the establishment of bond funds

The revised SC Guidelines on Unit Trust Funds released in April 2003 offers greater flexibility for bond funds.

R49

The tax framework should be reviewed to encourage issuance and investment in debt securities

Tax exemptions given for income from PDS and government guaranteed bonds (Budget 2003) and ABS (Budget 2004)

R50

Restrictions on the participation of unit trust funds and closed-end funds in exchange-traded derivatives will be deregulated

The issuance of the revised Guidelines on Unit Trust Funds on 1 April 2003 removed the 10% exposure limit on participation in futures contract.

R51

Derivatives will be allowed to be established and offered to investors in 2001

Derivatives fund can be established and offered to sophisticated investors with the issuance of Guidance Note 6 on 30 August 2005.

R52

Restrictions on the participation of local institutions, including EPF and insurance companies, in exchange traded derivatives should be deregulated

Participation of local institutions in derivatives has been enhanced through liberalization of investment restrictions for unit trust funds to invest in exchange-traded derivatives. A unit trust fund is  allowed to invest in derivatives as long as its exposure does not exceed the fund’s NAV.

Currently, local institutions such as EPF, LTAT and LTH only require approval from minister to participate in exchange traded derivatives. In fact, EPF has obtained blanket approval from the Minister to invest in any investment instruments including derivatives. Bursa Malaysia, is continuously having dialogue with these local institutions to create awareness on the needs for risk management and to encourage them to utilise the exchange-traded derivatives

R53

KLOFFE and COMMEX should actively pursue the introduction of more derivative products

There are currently 9 derivative products

• KLCI (FKLI) Futures
• KLCI (OKLI) Options
• 3 Mth Month Kuala Lumpur Interbank Offered Rate interest rate (FKB3) Futures
• Crude Palm Oil (FCPO) Futures
• 3-Year Malaysian Government Securities (FMG3) Futures
• 5-Year Malaysian Government Securities (FMG5) Futures
• 10-Year Malaysian Government Securities (FMGA) Futures
• Crude Palm Kernel Oil (FPKO) Futures
• Single Stock Futures (SSFs)
• Ethylene OTC Futures Contract

R54

The process for the introduction of new domestic exchange-traded derivative products will be streamlined

MDEX and MDCH were notified of the new process in November 2003.

R55

Local futures market intermediaries will be allowed to trade approved international financial derivative products by end 2001

The Future Industry (Specified Exchanges) Order 2005 was  gazetted on 28 July 2005 allowing future brokers and futures fund managers to trade in 34 different foreign exchanges in 21 countries

R56

A new category of International Members with full derivatives trading and broking rights will be allowed by 2002

In Budget 2005, the Government announced that foreign participants would be allowed to own 100% equity in future broking companies.

R57

Equity ownership requirements of futures broking firms will be liberalised to allow foreign majority ownership by 2003

In Budget 2005, the Government announced that foreign participants would be allowed to own 100% equity in future broking companies.

R58

Foreign Direct Clearing Membership will be allowed to be established within MDCH by 2002

100% foreign ownership for futures broking firms allowed under the 2005 Budget.

R60

The futures broking commission rate will be fully negotiable by 1 January 2002

Futures broking commission rates are fully negotiable following the relevant amendments to MDEX Business Rules, effective from 28 December 2001.

R61

The futures clearing and exchange trading fees will be reviewed by 1 January 2002

With effect from 28 December 2001, the clearing commission rates are fully negotiable.

R62

The commission sharing structure between futures brokers and their representatives will be fully negotiable in 2002

With effect from 28 December 2001, the commission sharing structure between futures brokers and their representatives is fully negotiable.

R63

Recognised foreign exchanges will be allowed to place remote access terminals with Malaysian futures brokers in return for reciprocal remote access arrangements

The objective of this recommendation was to widen the range of instruments available for Malaysian investors to trade in. This objective has been achieved via widening the list of Specified Exchanges and the approved contracts thus allowing Malaysian investors to trade in wide variety of derivatives products overseas. Operationalisation of the list of Specified Exchanges is being undertaken by Bursa under section 105 of the CMSA. 

R64

Regulated short selling and securities borrowing and lending activities should be reintroduced by 2002

Both RSS and SBL transactions can be conducted from 3 January 2007 on 70 approved stocks

R65

Efforts to introduce more competitive and innovative Islamic financial products and services will be actively pursued

Malaysian ICM now has a comprehensive range of products and services ranging from Shariah compliant equity investment, fixed income securities, derivatives and structured products including Islamic stock broking and fund management services.

Many innovations have taken place

• World’s first sovereign 5 year global sukuk of US$600 million (2002)
• World’s first rated Islamic residential mortgage backed securities (2004)
• World’s first listed Islamic Real Estate Investment Trusts (2005)
• First Islamic rinngit bond issuance by World Bank in any market of RM760 million (2005)
• First Islamic structured product approved (2006)
• SC’s Shariah Council approves single stock futures as a Shariah compliant instrument (2006)

Facilitative regulatory framework erected

• Islamic Securities Guidelines (2004)
• Islamic REITS Guidelines (2005) – First jurisdiction to issue such guidelines
• Launch of the Malaysia as an Islamic Financial Centre initiatives (2006)
• Facilitative and tax-neutral framework

R66

Efforts to introduce and promote a wider range of Islamic collective investment schemes will be facilitated

In 2006, total of 94 Shariah-based unit trust funds approved and out of these, 3 are global Islamic funds, 47 equity funds, 18 sukuk funds, 19 balanced fund while the rest were money market funds and structured products including Islamic Real Estate Investment Trusts. Also as at Sept 2006, there are 34 individuals and 4 companies registered to be eligible Shariah advisors

Major milestones include

• Released practice notes on the registration of Shariah advisors for Islamic unit trust schemes (2002)
• First Shariah index fund introduced (2002)
• Issuance of Islamic REITS Guidelines (2005) – First jurisdiction to issue such guidelines
• Launch of world’s first listed Islamic Real Estate Investment Trusts (2005)
• Introduction of global Islamic funds (2006)

R67

Investment restrictions for the Takaful industry should be further liberalised to facilitate greater mobilisation of Takaful funds into the Islamic capital market

BNM has prescribed the Takaful Regulation 2003 to expand the list of authorised Malaysian assets to provide more flexibilities to Takaful operators in their investment activities

R68

Efforts to mobilize untpapped Islamic assest through securitization should be pursued

The SC has played an active role in mobilising untapped Islamic assets through securitisation. In line with this, various tax incentives have been accorded for Islamic ABS

Major milestones include

• Guidelines on the Offering of Asset Backed Securities was introduced (2001)

• SC’s Shariah Council approves various assets as Shariah-compliant for structuring Islamic PDS (2002)

• First Islamic ABS issued (2003)

• SC’s Shariah Council approves all types of government related contracts can be securitised for the issuance of Islamic bonds and issues guidelines on determining pricing of the underlying asset for asset securitisation (2003)

• SC’s Shariah Council issues specific rulings on Sukuk Musyarakah to facilitate to facilitate the mobilisation of Islamic assets through securitisation process: (2005)

• Review of securitisation of wakaf assets (2006)

R69

Efforts to increase the pool of Islamic capital market expertise through training and education will be enhanced

The SC, together with its training arm, SIDC, has organised and participated in various training programmes, and workshops to increase the pool of Islamic capital market expertise.

In 2006, the inaugural session of Islamic Market Programmes was held. IMP earmarks SC and SIDC continuous effort in developing Islamic capital market experts. The program, which will be held annually in Malaysia, gathers international and local experts in Islamic capital market with the objective to promote the sharing and transfer of knowledge in ICM among market intermediaries, consultants, issuers, investment strategists, stock market professionals, senior finance executives, institutional investors; funding corporations including securities market regulators, government representatives as well as academicians.

R71

A facilitative tax and legal framework should be established for the Islamic capital market

Tax deductions given for expenses incurred in issuance of Ijarah, Mudarabah & Musyarakah (Budget 2003) and Istisna`(Budget 2004)

R73

Increased efforts to enhance the awareness of Malaysian Islamic capital market at the domestic and international level will be pursued

The SC has organised and participated in various seminars, colloqiums and workshops locally and internationally to enhance awareness. In conjunction with this various publications and booklets have published and distributed.

In 2002, SC was accorded the honour of a mandate from the International Organisation of Securities Commissions (IOSCO) to lead a taskforce on Islamic capital markets. The report was published in 2004.

In 2006, SC Chairman was part of the High Level Taskforce responsible for the establishment of Malaysian International Islamic Center initiative. SC is a member of the MIFC Executive Committee, the coordinating committee to implement various initiatives to promote Malaysia’s ICM

R74

Strategic alliances between Malaysia and other Islamic capital markets should be established

LFX (Malaysia) have signed a MOU with Bahrain Stock Exchange (BSE) and the International Islamic Financial Market in Bahrain

R75

The government and government-related entities should consider issuing Islamic debt securities in the global market

On 25 June 2002, Malaysia issued its first global sovereign US dollar Islamic bond amounting to US$600 million (RM2.28 billion).

R77

Incentives to encourage the entry of foreign intermediaries and professionals with expertise in Islamic capital market-related business should be provided

Budget 2007 introduced various incentives to encourage the entry of foreign intermediaries and professionals with expertise in Islamic capital market-related businesses for example the income tax holiday granted for fund managers managing fund in accordance to Shariah principles

Malaysia as an Islamic Financial Centre initiatives has also introduce customized incentives in term of tax and immigration procedures to further encourage the participation of international Islamic finance intermediaries and experts in Malaysia

R78

Efforts to promote consolidation of the stockbroking industry will be pursued

The total number of SBCs has been reduced from 66 to 35.

R79

A new category of full-service intermediaries to be known as Universal Brokers will be introduced

The introduction of Universal Brokers was announced as part of the policy framework for the consolidation of the stockbroking industry. To date, 7 SBCs have been granted UB status.

R80

Branching restrictions on stockbroking companies will be deregulated

Branching flexibilities for Universal Brokers have been announced. This was followed by the release of Guidelines on the Establishment and Location of Branch Office by a Universal Broker and a non-Universal Broker.

R81

The scope of capital market services that may be offered by stockbroking companies will be widened

UBs are allowed to take on a range of capital market services including corporate finance activities. The guidelines for UBs to deal directly in unlisted debt securities were issued on 30 Oct 2002.

R82

Stockbroking companies and their representatives will be allowed to offer a range of services under a single license

SC submitted to MOF the proposed Capital Market and Services Act 2006 (CMSA)

Part III of the CMSA allows stockbroking companies and their representatives to carry out a range of activities under a single license.

R83

Stockbroking commission rates will be liberalized in two stages:           

Stage 1 – with effect from 1 September 2000, commission rates for all trades above RM100,000 will be fully negotiable while trades with contract values of RM100,000 and below are subject to a fixed rate of 0.75%    

Stage 2 – with effect from 1 July 2001, commission rates will be fully negotiable for all trades, subject to a cap of 0.70%

Stage 1 of the liberalization process took effect from 1 September 2000 while Stage 2, which was deferred to 1 July 2002, has also been fully implemented.

Inter-broker and institutional trades are fully negotiable while minimum commission rates for retail trades are as follows:

• Trades over RM100,000; 0.30%
• Trades up to RM100,000; 0.60%
• E-broking transactions; up to 30% discount

R84

Commission sharing arrangements between remisiers and stockbroking companies will be fully negotiable in 2002

Commission sharing structure between SBCs and their representatives is fully negotiable effective 1 July 2002.

R85

Foreign equity participation in domestic stockbroking companies will be liberalised in stages beginning from 2003

Allowed under liberalisation measures announced in the 2005 Budget.

R86

Measures to facilitate online trading will be introduced

Revised Electronic Client-Ordering System (ECOS-2) issued.

R87

Efforts to develop a standardised and centralised back-office system for the stockbroking industry will be facilitated

The objective of this recommendation was to reduce development and operating costs among industry players. This has been achieved through the open architecture of Bursa trade coupled with the ability for stockbroking companies to outsource their back-office operations

R88

Efforts to further promote the use of information technology and e-commerce by intermediaries will be facilitated

Various guidelines have been introduced to facilitate and promote the use of information technology and e-commerce by intermediaries

• Guidelines on Electronic Access Facilities for Universal Brokers has been released in August 2001

• Guidelines on Electronic Prospectuses and Internet Securities Applications have been released on September 2001

• Amendments to the securities laws have were gazetted on 2nd January 2004 to further facilitate the use of e-commerce in the capital market.

• Framework for the KLSE’s Electronic Client-Ordering System (ECOS) was completed and issued as ECOS-2 on 19th January 2004.

• Guidelines on Online Transactions of and Online Activities in relation to Unit Trusts were released in November 2004

• Guidelines on Electronic Contract Notes were issued in April 2005

R89

The scope of activities carried out by remisiers should be expanded to a wider range of value-added capital market services, including financial planning

From 21 March 2003, licencees who have obtained professional qualifications, such as the Certified Financial Planner, during the course of their profession would be awarded 20 CPE points for the purpose of licence renewal.  The necessary legislative amendments were passed by Parliament in November 2003.

R90

A more market-based approach to regulation will be applied to the investment management industry

Parliament has passed the legislative amendments to the SIA to bring unit trusts within the ambit of the licensing regime.

R91

The process for introducing new investment management products will be streamlined

The process of introducing unit trust funds had been streamlined via the issuance of the revised Guidelines on Unit Trust Funds on 1 April 2003.

R92

A uniform regulatory framework streamlining the licensing rules for the investment management will be introduced

The Capital Markets and Services Act has rationalised the guidelines relating to unit trust management companies, asset management companies and universal brokers in view of the new licensing rules pertaining to fund managers.

R93

The management of investment funds should be further deregulated to allow for greater international portfolio diversification

Exchange controls for investment abroad have been liberalized by BNM effective April 2004.

R95

EPF’s investment guidelines should be liberalised to allow the adoption of the “prudent person” approach

EPF has obtained blanket approval for the variation of quantitative restrictions in the EPF legislation

R96

EPF should further diversify the management of its funds by placing out a greater portion with external fund managers

Under Budget 2005, EPF is allowed to increase the size of its fund placed with local fund management companies, including non-bank owned companies from RM6 billion to RM12 billion within 3 years.

R99

The further outsourcing of the management of funds by insurance companies should be promoted

Insurance companies are allowed to outsource RM300 million or 30% of total assets of the company, whichever is higher.

R100

Restrictions on the management of funds by Foreign Fund Management Companies will be liberalised

The government in Budget 2005 has announced the prioritization on the management of funds for 5 foreign fund management companies.

R103

Further tax incentives to encourage investments in collective investment schemes will be examined

Tax incentives were extended under Budgets 2003 and 2004 to encourage the development of property trust funds

R104

Further efforts to promote investors’ awareness of managed funds investment will be undertaken

Programmes held include:

• SIDC Saturday Seminar Series
• Launch of 2003 Investor Education Campaign
• Participation in PNB and FMUTUM yearly roadshows
• Investor Education Talks

R105

Training and professional development needs of the Malaysian investment management industry will be facilitated

Two streams of mandatory CPE programmes have been established. The SC also holds regular workshops and seminars for professionals in this sector.

R106

The development of the financial planning industry will be facilitated

From 21 March 2003, licencees who have obtained the Certified Financial Planner during the course of their profession would be awarded 20 CPE points for the purpose of licence renewal.  The necessary legislative amendments were passed by Parliament in November 2003. Courses on Financial Planning has been included as part of the SIDC-CPE programme.

R107

The further development of the trust/custodial services industry will be promoted

Fixed structures for annual trustees’ fees were deregulated in July 2002. The revised SC Guidelines on Unit Trust Funds lifted the requirement for the SC’s approval for delegation of custodial functions of trustee and introduced the “registration scheme” for trustees.

R108

The recommendations contained in the Report on Corporate Governance will be effected in a timely and comprehensive manner

Issuance of KLSE’s Revamped Listing Requirements to bring into effect recommendations of the Finance Committee on Corporate Governance. Establishment of the Minority Shareholder Watchdog Group.

R110

Minority shareholders’ rights in respect of related party transactions will be further strengthened

The revamped KLSE Listing Requirements released in February 2001 formalised the specific rules on related-party transactions. The SC has also assisted the ROC on amendments to the Companies Act.

R111

Public listed companies will be required to provide appropriate shareholder value disclosures for securities issuance, restructuring, take-overs and merger exercises

The introduction of DBR has expanded substantially the quantity and quality of information that is disclosed to investors. Some listed companies have voluntarily started paying greater attention to enhancing shareholder value and recognition through increasing their dividend yields and establishing investment relation functions while some companies are disclosing shareholder value-based metrics in their annual reports.

R112

A set of best principles, best practices and standards will be developed to encourage institutional investor activism in corporate governance and the promotion of shareholder value recognition

MSWG launched the Guide of Best Practices for Institutional Shareholders setting out a framework of best practices for Institutional Shareholders in driving shareholder value and in managing investment risks.

R113

The SC will strongly support the efforts of Badan Pengawas Saham Minoriti Berhad in promoting shareholder value recognition

In 2002, SC disbursed a grant of RM250,000 to BPPSM, in fulfilment of its commitment to assist BPPSM in its setup cost. SC then assisted it to obtain CMDF funding for its operations from 2005 to 2007

R114

The SC will work with relevant industry bodies in enhancing the quality and independence of auditors of public listed companies

The establishment of the Malaysian Audit Practices Board was approved to set accounting standards and oversee the implementation of standard by the professional account bodies. The SC has also been included in the licensing committee.

R115

The SC will encourage the improvement of channels of communication between companies and their shareholders

The SCA has been amended to facilitate electronic filing. There is increasing recognition of investor relations among PLCs, particularly through investor relations units and websites.

R116

The SC and KLSE will initiate further measures to promote timely, comprehensive and regular dissemination of material and relevant company information to shareholders

SC had approved a concept paper on good disclosure practice, following which the KLSE established an industry Taskforce to issue a set of Corporate Disclosure Best Practices. The Corporate Disclosure Best Practices Task Force led by Bursa Malaysia issued the Best Practices in Corporate Disclosure in 2004

R117

Efforts to further enhance disclosures in annual reports by public listed companies will be examined

The Revamped KLSE Listing requirements have made it mandatory for quarterly reporting as well as disclosures on how the company has implemented the Code on Corporate Governance.

R118

The SC will put in place a comprehensive programme that will gradually implement a system of market-based regulation across all segments of the capital market

The Capital Markets and Services Act has consolidated the SIA and FIA into a single Act

R119

The SC will maintain the existing regulatory structure in relation to arrangements for the regulation of wholesale and retail markets

Review by the SC shows no changes are required for the existing regulatory structure in relation to arrangements for the regulation of wholesale and retail markets.

R120

Relevant identified market institutions will be established as full front-line regulators to complement the SC’s role in the regulation of capital markets

The scope of duties between the SC and the KLSE has been defined and clarified following the delineation of duties between them.

R122

Further efforts will be pursued to achieve regulatory parity in the treatment of all participants in the capital market through functional regulation

To achieve functional regulation within the capital market, the SC works closely with all relevant authorities within the overall financial services sector, e.g. through MOUs with BNM.

R123

Efforts to create a single licensing regime and consolidation of securities and futures legislation will be pursued

With the introduction of the Capital Markets and Services Act , a single licensing framework has been introduced

R124

Measures to eliminate market segmentation in respect of underwriting, corporate finance, asset management and brokerage services will be introduced

UBs have been allowed to offer a full range of capital market services such as corporate finance activities, dealing with unlisted debt securities and to submit corporate proposals.

R125

Cross-market surveillance as well as co-operation and co-ordination between regulatory authorities should be enhanced to strengthen market oversight, and to ensure the consistency and effective pursuit of regulatory objectives and priorities

Working arrangements between various enforcement agencies have been established through interagency and tripartite meetings. Cases have been referred between the various agencies for further action.

R126

Measures to enhance regulatory transparency, accountability and independence will be introduced

The SC emphasizes a consultative approach as reflected in its CMAC meetings, its working committees, and multi-stakeholder brainstorming engagement sessions such as the SC Dialogue. The SC generally releases exposure drafts to the public.

R127

Measures will be introduced to enhance processes and capabilities for effective enforcement

Enhanced enforcement strategy pools resources better and improves case prioritization.  Cases are now typically brought to court within 6–12 months from the opening of an investigation paper compared to over a year previously.

R128

Measures will be taken to enhance the enforcement capacity of the SC

SC achieved successful prosecution in several high profile cases, including:

• First convictions against insider trading, corporate governance and disclosure breaches, securities fraud and illegal futures activity

• Secured first custodial sentence for a capital market offence.

R129

The regulatory framework will be enhanced to provide for appropriate mechanisms for systemic risk management

KLSE introduced circuit breakers to enhance market stability and investor confidence. The Capital Adequacy Requirement framework for stockbroking companies has been refined to promote a risk-based approach to supervision. Within the SC, a Risk Management Department was established and Market Crisis Management Procedures were introduced.

R130

The SC will develop a regulatory framework for the implementation of electronic commerce in the capital market

Relevant amendments to the securities laws were gazetted to facilitate the use of e-commerce in the capital market. Also, Guidelines on Electronic Prospectuses and Internet Securities Applications and Guidelines on Electronic Access Facilities for Universal Brokers have been released

R131

The SC will introduce measures to improve the assessment of regulatory cost-effectiveness

The SC has undergone an Organisational Transformation Programme to streamline its processes.  Policy formulation process has been enhanced to facilitate better assessment of cost and benefits of measures.

R133

A comprehensive review of the current tax framework relating to the capital market should be carried out

Many initiatives have been implemented across various capital market segments to ensure greater tax neutrality and also to enhance the competitiveness of Malaysian financial products.

R134

Capital market regulation will be technology-neutral and facilitative of innovation

Securities laws have been amended to ensure technology neutrality.

R136

Regulatory issues relating to the primary market offering and secondary market trading of capital market products through electronic means will be clarified

Guidelines on Electronic Prospectuses and Internet Securities Applications were released on September 2001, and amendements to the securities laws were gazetted to further facilitate the use of e-commerce in the capital market. The framework for the KLSE’s Electronic Client-Ordering System (ECOS) has been completed.

R139

The development of online value-added services and innovations such as financial portals and financial hubs will be facilitated

The Capital Markets and Services Act encompasses a framework for registration of electronic facilities and in line with this, SC has allowed financial supermarkets to be established

R140

Online trading of units in unit trust funds will be permitted

Guidelines on Online Transactions of and Online Activities in relation to Unit Trusts have been released

R141

Surveillance and enforcement capabilities of online capital market activities will be enhanced

The SC is collaborating with other agencies such as the Malaysian Communication and Multimedia Commission (MCMC) to improve surveillance and enforcement activities. SC has trained its staff on the latest internet surveillance and investigation techniques.

R142

Training and education programmes for market institutions, market participants and investors on the use of technology and electronic commerce will be enhanced

The SC provides relevant information through its Malaysian Investor website and SC Investor Education talks on the use of technology and e-commerce.

R143

International standards of security, reliability and privacy will apply to technology infrastructure

ISO17999 certification was awarded by SIRIM on SC’s ERS environment.

R144

Training programmes to create highly skilled and flexible market professionals will be developed

SIDC conducts various capital market workshops, seminars, conferences and joint training sessions.

R145

A culture of continuous learning and skill enhancement will be encouraged through Continuing Professional Education programme

The SC, through its training arm, SIDC, launched a phased mandatory CPE programme for licensed representatives in 2001 and this was eventually extended to cover futures broker’s representatives, fund manager’s representatives, investment representatives, future’s fund manager’s representatives, futures trading adviser’s representatives. More than 500 courses have been approved as CPE courses reflecting the breadth and depth of training programmes available for the industry.

Also a CPE Tracker system was launched to enhance the tracking and monitoring of the CPE programme. The Tracker interfaces with the Licensing Department's Electronic Licensing Application (ELA) system, thus facilitating the straight through processing of the licensing renewal applications. The Tracker also enabled licensees to keep track and monitor their CPE points.

R146

Skills of regulators, including front-line regulators and self-regulatory organisations will be strengthened

The SC invests substantially in staff development to ensure staff are updated on international best practices particularly in the areas of supervision, monitoring, compliance and enforcement.

R147

Efforts will be made to increase the availability of skilled graduates for the capital market through arrangements with universities in curriculum development

MOUs have been signed with 7 local universities, namely Universiti Utara Malaysia, Universiti Teknologi MARA, Universiti Malaya, Universiti Multimedia, Universiti Islam Antarabangsa, Universiti Kebangsaan Malaysia and Universiti Putra Malaysia to expand their capital market syllabus. Also in 2003, the Capital Market Graduate Training Scheme was launched to assist unemployed graduates to gain capital market knowledge

R148

Licensing examinations for capital market professionals will be streamlined

The Licensing Examination Advisory Panel (LEAP) was established and a new examination structure has been implemented

R149

Education, training and licensing examinations will be made more accessible

154 examinations for 10 licensing modules have been conducted. Examinations were held in Kuala Lumpur, Johor Bahru, Kota Kinabalu, Kuching and Penang.  An E-Learning System to allow users to attend courses on-line has been developed.

R150

The skills, knowledge and competencies of Bumiputera intermediaries will be enhanced

The Bumiputera Dealer’s Representatives Education Fund was established to provide financial assistance to Bumiputera dealer’s representatives to pursue professional qualifications.

R151

Investor protection and education will be further promoted through awareness programmes

Over 50 Investor Education Talks have been conducted throughout Malaysia so far.

R152

The SC will develop SIDC as a regional capital market training centre

SIDC is being established as a separate legal entity.

SIDC is working with various parties to position itself as a regional capital market training centre